INDIA CHEMICAL INDUSTRY SPECIAL .......Opportunities for commodity & speciality chemicals in the paints & coatings industry

Opportunities for commodity & speciality chemicals in the paints & coatings industry

Paints & coatings are functional products that cover, protect and embellish the underlying surface to which they are applied. The extent of each of these roles depend on the use – paints applied on our walls, for instance, have as much an aesthetic role as a protective one; in industrial coatings, the emphasis is reversed. From a chemicals standpoint, paint is a complex mixture of several ingredients each of which has a role to play in delivering the functionality desired. The choice of ingredients is determined by the performance to be delivered, the economics of doing so, competitive forces and regulations, if any. Product innovation in industrial coatings, in particular, is often driven by the consumer and accomplished in teams that include ingredient suppliers, the paint manufacturing companies and the consumer. Switch to water-based systems Paints can be water- or solvent-based and there is a trend to move to the former – not just for architectural coatings that decorate our walls, but even in demanding areas such as automotive coatings. These shifts are driven by regulations that restrict the emission of volatile organic compounds (VOCs) known to have harmful effects on human health and/or the environment. These shifts pose challenges – the most important of which is meeting the rigorous performance requirements. Solvent-based systems have several years of optimisation behind them, stemming from a long history of use, and replacing them involves significant effort. Array of chemicals Several types of resins are used in paints – alkyds, acrylics, epoxies, phenolics, urethanes etc. – and each of these has its strengths and weaknesses. Underlying this diversity is a commonality of function, viz. bind all other ingredients in a formulation to form a film that eventually dries (by itself, or aided by the action of heat, light or catalysts), to cover and protect the underlying surface. Although a paint is often described by the nature of the resin system used, several other ingredients – some in very small amounts – are crucial for performance. The range of performance chemicals, also referred to as coating additives, include surfactants, dispersing agents, preservatives, thickeners, driers, anti-skinning agents, to name just few, are vital. While some can be described as specialties, several have come to become pseudo-specialities or even commodities, with several vendors offering ‘me too’ products that essentially do the same job. The additives are delivered by an array of companies and few, if any, offer more than a handful of products. Procurement in the paint industry is hence a complex exercise with each company having to deal with several vendors. Dependency on imports India has a vibrant paint industry likely to see several years of growth, given the ongoing infrastructure build-up in the country. From an ingredients standpoint there is a great dependency on imports, which is worrying, but can be viewed as diversification opportunities for chemical companies. The import dependence stretches from high volume products such as pigments, resins and some solvents, to several high value specialities. In some cases, the import dependence is in the raw materials needed. Competencies in pigments Start with pigments – the most important of which is titanium dioxide. The rutile grade, best suited for paints, is manufactured only by one small producer, Kerala Minerals and Metals Ltd., and its inability expand has left the market open to imports. Import numbers are rising year-on-year in line with growth in the market, with some of the gap also being plugged by imports of the cheaper anatase variety, mainly from China. The irony here is that India has substantial reserves of the basic raw material – ilmenite – that can be upgraded to serve as feedstock for a world-scale pigment plant. Efforts by the Tata group several years ago to build one such project, in partnership with a leading technology vendor, were stymied by land acquisition problems, and the project seems to have been dropped. There have been a few half-baked announcements since, but nothing has come to fruition yet or a possibility in the near term at the least. For paint companies, titanium dioxide is the single largest component in a typical formulation and companies here – and elsewhere – have taken several steps to reduce its cost impact. These efforts have been in three directions: substitution of the more expensive rutile with cheaper anatase (as mentioned earlier); use of cheaper iron oxide for coloured shades; and use of speciality resins to lower the loading of titanium dioxide pigment. While local availability of most other inorganic pigments is not much of an issue, there are several organic pigments where import dependency is still high, even as India has a world-leading position in some others. The phthalocyanines are a good example of the latter; India is now the dominant supplier of green and blue pigment to global markets. Most producers are located in Gujarat and there is substantial capacity to meet requirements well into the future. In the case of a few other other pigment classes such as quinacridones and carbazole violet, there is a fair degree of self-sufficiency, and only about 20% of the requirements are imported. The handful of domestic players making these, have to their credit invested in research, and developed customised surface treatment technologies that enable them to meet the exacting requirements of premium customers. In the case of azo pigments – another important pigment category – almost all of the requirements are met by imports from China and this is unlikely to change in the near term. China’s domination stems from integration to raw materials and large scale of operation, though weak environmental norms have a role to play. Potential investors will need to carefully evaluate competitiveness before taking a plunge in this competitive domain. Raw materials for resins Among the popular resin chemistries for water-based coatings, are acrylic emulsions and these require several raw materials that are all imported: butyl acrylate, ethyl acrylate, methyl methacrylate, styrene monomer, etc. India does have a vibrant resins industry that meets most requirements, but the need to import raw materials is a constraint only now being addressed. Even at the current levels of consumption – which are low as compared to world averages – the volumes of monomers needed to meet domestic requirements are enough to justify one or even two-world scale plants. The good news is that at least on the acrylics front one project is now in the implementation stage and one more is in the drawing board. In the case of styrene, however, no project is on the cards even though India’s requirements are now well past 700-kt (though a bulk is used not in the paints industry, but for making the thermoplastic, polystyrene). Alternative chemistries – such as vinyl acetate-ethylene copolymers – are also finding a place in the Indian coatings market, but these too need to be imported. Domestic availability will expand markets, and it is likely that the next few years will see the first investments in plants to make these. Bio-based options While most solvents used in paints are petroleum-based and likely to stay that way, there is a trend – at least internationally – to move towards ‘greener’ options including some bio-based ones (fully or partially). A good example is ethyl lactate, which has the advantage of being biodegradable, non-corrosive and non-toxic, without compromising performance in paints. The solvent has good wetting power for most pigments and has been shown to enhance the performance of resins. Technologies to produce lactic acid via the biotechnology route are commercial and with bio-ethanol available in India – from sugar cane molasses or cellulosic biomass – a preliminary case for investment in an ethyl lactate plant as a bolt on to a lactic acid/polylactic acid facility exists. Prospects for performance chemicals Significant opportunities exist in the domain of coating additives: in surfactants, defoamers, coalescing agents, thickeners etc. Amongst thickeners, cellulose ethers are an important product class and the market is still a preserve of a handful of multinationals. India is well placed on cellulose – especially if it can exploit its large and sustainable resource base of bagasse – but the business is demanding, with a high commitment to innovation to develop a range of products to meet customer needs. While petroleum-based products and chemistry will continue to be a mainstay for paints & coatings, there are niche opportunities opening up for use of ‘greener’ options – of course with no compromise on performance. Paint companies even in India are now touting claims such as ‘odour free,’ ‘low-VOC,’ ‘formaldehyde-free’ etc. and ingredient suppliers have an opportunity here, as these niches will expand. Regulatory impacts on the paints & coatings industry have so far been limited, but that could change in the near future, and drive a reformulation of coatings, which will repercussions for raw material suppliers. In areas such as biocides there is now a large body of work to demonstrate what is safe and what is not, and while these restrict the choices available they do expand business prospects for products deemed safe. In several ways, the Indian paints and coatings industries will continue to be an important driver of growth for the chemical industry. The latter needs to better leverage the opportunities posed by the former.

Ravi Raghavan

CHWKLY  14MAR17